Sec Opinion on Foreign Corp Ownership

8/19/2019 Sec Opinion on Foreign Corp Ownership

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Republic of the PhilippinesSECURITIES AND EXCHANGE COMMISSION

Department of FinanceSECBldg. EDSA,Greenhills, Mandaluyong City

Office of the General Counsel

08 August 2012

AITY. lOMER A. OCHAVILLO

Rm. 609 City & Land Megaplaza ADB Ave., Ortigas Center PasigCity

Dear Atty. Ochavillo:

SEC-OGeOpinion No. 12-11Foreign-owned corporation;Real property

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This pertains to your request for opinion dated 15 March 2012 inquiringwhether or not a private corporation, 99.995% of stockholdings are owned byforeign individuals, can acquire/buy real property here in the Philippines.

The Civil Code of the Philippines ("Civil Code'') generally classifies property asimmovable (real) or movable (personal).! Real property comprises a broadenumeration under the Civil Code, 2 which includes land and buildings thereon.

1 Art. 414. All things which are or may be the object of appropriation are considered either:(1) Immovable or real property; or (2) Movable or personal property.

2 Art. 415. The following are immovable property:(1) Land, buildings, roads and constructions of all kinds adhered to the soil;(2) Trees, plants, and growing fruits, while they are attached to the land or form an integralpart of an immovable;(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot beseparated therefrom without breaking the material or deterioration of the object;(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention toattach them permanently to the tenements;(5) Machinery, receptacles, instruments or implements intended by the owner of thetenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;(6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature,in case their owner has placed them or preserves them with the intention to have thempermanently attached to the land, and forming a permanent part of it; the animals in theseplaces are included;(7) Fertilizer actually used on a piece of land;(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, andwaters either running or stagnant;(9) Docks and structures which, though floating, are intended by their nature and object toremain at a fixed place on a river, lake, or coast;


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With respect to ownership of private lands, the Constitution provides: "Save incases of hereditary succession, no private lands shall be transferred or conveyedexcept to individuals, corporations, or associations qualified to acquire or holdlands of the public domain.,,3Among those qualified are corporations or associations

"at least sixty per centum of whose capital is owned by citizens.,,4

Furthermore, Sections 22 and 23 of Commonwealth Act No. 141 ("C.A. No.141"), as amended, provide:

"Sec. 22. Any citizen of lawful age of the Philippines, and any such citizennot of lawful age who is a head of a family, and any corporation or association of which at least sixty per centum of the capital stock or of any interest insaid capital stock belongs wholly to citizens of the Philippines, andwhich is organized and constituted under the laws of Philippines, andcorporate bodies organized in the Philippines authorized under their charters to do so; may purchase any tract of public agricultural landdisposable under this Act, not to exceed one hundred and forty-four hectares inthe case of an individual and one thousand and twenty-four hectares in that of acorporation or association, by proceeding as prescribed in this chapter: Provided,That partnerships shall be entitled to purchase not to exceed one hundred andforty-four hectares for each member thereof. But the total area so purchasedshall in no case exceed the one thousand and twenty-four hectares authorized inthis section for associations and corporations.xxx

Sec. 23. No person, corporation, association, or partnership other thanthose mentioned in the last preceding section may acquire or ownagricultural public land or land of any other denomination or classification, whichis at the time or was originally, really or presumptively, of the public domain, or any permanent improvement thereon, or any real right on such land andimprovement xxx'tS

Thus, in order for a corporation to purchase, acquire or own land in thePhilippines, it has to comply with the sixty percent (60%) requirement, which meansthat at least sixty percent (60%) of the total capital stock of the corporation must bewholly owned by Filipino citizens. 6 Corollarily, if more than 40% of its capital isowned by foreigners, then the corporation cannot own Philippine land.

On the other hand, as to ownership of real properties other than land,foreigners, generally, can purchase houses or buildings unless specifically prohibitedby law.

(10) Contracts for public works, and servitudes and other real rights over immovableproperty.

3 Article XII, Sec. 7 of the Constitution.4 Article XII, Section 2 of the Constitution.S SEC-OGCOpinion No. 10-20, addressed to Atty. Teodulo G. San Juan, Jr. of the Castillo Laman TanPantaleon & San Jose Law Firm, 27 May 2010.6 SEC-OGCOpinion No. 10-20 dated 27 May 2010, addressed to Atty. Teodulo G. San Juan, Jr.


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One such example of a prohibition on ownership of interest in a building is inthe case of a condominium project. A foreign individual or a foreign corporation canown an interest in a condominium project subject to certain conditions:

"Interests in a condominium, which may be in the form of ownership,lease or any other real rights, are subject to the following rules:

1) If the condominium project is set up on leased land, thecorresponding condominium corporation may be established by acorporation which is wholly owned by a foreign firm. x x

2) Where the condominium corporation is a Filipino corporation which ownsthe land on which the condominium project is situated, no interest in thecondominium may be transferred to aliens or to corporations more than 40% of the capital stock of which is owned by aliens; or, when the common areas areheld by a condominium corporation, the transfer to aliens of units in the project

may be made only up to the point where the concomitant transfer of stockholdings in the condominium corporation would not cause thealien interest in such corporation to exceed 40% of its entire stock.(citations omitted)';

Finally, with respect to your allegation that In-Wangsan Corporation,S acorporation wholly owned by foreigners, became a "buyer" of a parcel of land,including an eleven storey building situated thereon, we shall refer your letter to theEnforcement and Prosecution Department (EPD) for investigation and proper action,if necessary. Pleasecoordinate with the EPDfor any further concerns.

It shall be understood, however, that the foregoing opinion is rendered basedsolely on the facts and circumstances disclosed and relevant solely to the particular issues raised therein and shall not be used in the nature of a standing rule bindingupon the Commission in other cases or upon the courts whether of similar or dissimilar circumstances.

9If, upon further inquiry and investigation, it will be

disclosed that the facts relied upon are different, this opinion shall be rendered void.

Pleasebe guided accordingly.

Very truly yours,

C~EAGeneral Counsel

7 SEC-OGC Opinion No. 12-03, Letter dated 06 February 2012 to Atf:.!. Joan A. Giduquio-Baron. Pleasesee the original opinion for the authorities cited.8 SEC Reg. No. CS200419473.9 Paragraph 7, SEC Memorandum Circular No. 15, Series of 2003.

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Sec Opinion on Foreign Corp Ownership